Major banks converging on a hold call. Westpac, like CBA earlier is looking for on hold tomorrow from the Reserve Bank of Australia, a strong signal for AUD stability around the August meeting. The softer Q2 CPI print has genuinely shifted the consensus.
Westpac’s framing that only the downside risks it had flagged actually materialised, and that energy cost pass-through from the Middle East conflict has not continued into recent months, lines up closely with CBA’s own point that June’s inflation data showed higher input costs were not broadly flowing through to consumers. Both banks expect the RBA to keep hawkish language even while holding, which should limit how much a hold alone moves AUD, with the more important signal being whether the Board’s tone shifts materially dovish or stays cautious. The oil and energy angle is the one area where this cuts across our Iran war coverage, since a renewed spike in Middle East driven fuel costs would be the clearest way to revive the pass-through risk both banks currently see as contained, and would complicate the case for staying on hold much further into the year.
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Westpac and CBA are both calling a hold for August, and both point to the same signal, energy cost pass-through has quietly stopped.
Summary:
- Westpac expects the RBA to leave the cash rate unchanged at 4.35% at its August meeting
- Q2 CPI came in below Westpac’s forecasts on both headline and trimmed mean measures, with only the downside risks it had flagged materialising
- Westpac says the earlier pass-through of higher Middle East driven energy costs has not continued into recent months
- Westpac expects the RBA to retain a hawkish posture while it assesses incoming data over coming months
- The call aligns with CBA’s own on-hold view, which cited slowing growth, softer inflation, faster labour market easing and weaker housing
- CBA’s June inflation read similarly found higher input costs were not broadly passing through to consumers, reinforcing Westpac’s assessment
Westpac said it expects the Reserve Bank’s Monetary Policy Board to leave the cash rate unchanged at 4.35 percent at its August meeting, pointing to a softer than expected second quarter inflation print as the key reason the Board has room to hold. The bank’s economists said Q2 CPI came in below their forecasts on both a headline and trimmed mean basis, adding that only the downside risks they had flagged in their preview ended up materialising.
Westpac described the result as welcome news, noting that the substantial pass-through of higher energy costs seen in the early phase of the Middle East conflict has not been followed up by further pass-through in recent months. Even so, the bank expects the Board to retain a hawkish posture as it works through the coming months of data, arguing that if inflation continues behaving as expected, policymakers can gain confidence that price growth is returning to target under existing settings without needing to move rates further.
The call echoes the view set out by Commonwealth Bank of Australia ahead of the same meeting, which also expects the RBA to hold in August and for the remainder of 2026, citing slowing growth, softer than forecast inflation, faster labour market easing and a weaker housing market. CBA’s own read of the June inflation data found that higher input costs were not broadly flowing through to consumer prices, a conclusion that lines up closely with Westpac’s assessment that Middle East driven energy cost pass-through has stalled. Both banks expect the RBA to keep flagging its willingness to hike again if conditions warrant it, even without an immediate case to tighten given the current data.
With two of the major banks now aligned on a hold, attention is likely to shift toward the RBA’s updated economic forecasts and the tone of Governor commentary at the meeting for signs of how much confidence the Board has gained that inflation is on a sustainable path back to target.
- The decision is due Tuesday, 11 August 2026 at 2:30pm Sydney time (04:30 GMT, 12:30am US Eastern), with Governor Michele Bullock’s press conference following an hour later at 3:30pm Sydney time (05:30 GMT, 1:30am US Eastern)
This article was written by Eamonn Sheridan at investinglive.com.